Fitch Solutions sees BSP rate hikes in 2022

Fitch Solutions forecasts that the Bangko Sentral ng Pilipinas (BSP) will maintain its current benchmark interest rate throughout 2021 but anticipates a series of rate hikes totaling 75 basis points in 2022.

The analytics firm believes the BSP will adopt a gradual approach to monetary policy normalization as the Philippines continues to ease COVID-19 restrictions and work towards economic normalization.

Fitch Solutions projects the BSP's policy rate to increase from 2.00 percent at the end of 2021 to 2.75 percent by the close of 2022.

Despite inflation remaining above the government's target for the entire year, the BSP has kept its overnight reverse repurchase rate at a record low of 2 percent to support economic recovery.

BSP Governor Benjamin Diokno has previously stated that the risks associated with premature monetary tightening outweigh the risks of delaying such measures during the early stages of economic recovery.

Fitch Solutions also noted that the prolonged period of low interest rates could potentially weaken the Philippine peso, especially as the US dollar strengthens and other central banks implement tighter monetary policies.